Question

In: Economics

Some states exclude necessities, such as food and clothing, from their sales tax. Other states do...

Some states exclude necessities, such as food and clothing, from their sales tax. Other states do not.

•Discuss the merits of this exclusion in terms of both efficiency and equity.

•Consider North Carolina, does it exclude necessities, why or why not?

•As with all things, one decision can lead to another. Once necessities are excluded, “necessities” must be defined. Research the tax definition of “necessity” in North Carolina (or another if your state does not exclude) and evaluate it.

Solutions

Expert Solution

As per the efficiency of excluding things like clothes and food from sales tax, i would say that it is less efficent do such because it will bring up much complex structure of tax collection

  • this gives more favourable case for consumers and they will possibly increase the usage of these kind of good even if it is not much nessessary for them.
  • But when it comes to equity it is much usable because the people with lower income could make use of this buy using this products in affordable cost

Reconsidering the definition of necessities, they are actually good or services which are indeed much meeded for the better health of human.

Considering Kerala as home state

  • obviously the most source of income as tax for the state is from sales tax. They do sell alcohol and which indeed is their tax income. Sales tax recieved is much high in our state which encourages use of necissities.

Hope this helps

please comment for doubts

thanks


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